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Bitcoin is gaining more privacy features as concern grows over cryptocurrency usage during a recent wave of ransomware attacks.
The biggest update in four years to the computer software behind the world’s largest digital token was approved last weekend with little fanfare. In recent years, the fighting between the groups known as the miners who run the network has been characterized as a civil war and has led to ramifications such as Bitcoin Cash.
While the main advance is making the network easier to use for some large built-in apps called smart contracts, the so-called Taproot update could also allow more people to use wallets and privacy services that make it harder to find out who paid who. This could strengthen the anonymity features prized by advocates of the currency, which law enforcement says is often used for illicit purposes. The United States recently linked cyber attacks on Colonial Pipeline Co. and meat producer JBS SA to groups in Russia that used cryptocurrency.
Things will be less fingerprinted – what use case or what wallet it is, ”said Adam Back, CEO of crypto services developer Blockstream, who helped code Taproot, in an interview. .
Bitcoin supporters, who have long called the taint of illicit use exaggerated, said the changes could improve the way payments to hundreds of people are sent, or the way crypto derivatives or betting are carried out over the network.
Today, the vast majority of smart contract applications are built elsewhere, on networks like Ethereum. Taproot won’t quite make Bitcoin a direct competitor to the most widely used crypto network; Ethereum has more developer activity and functionality, and is easier to use. But it’s a step in that direction, and it could make Bitcoin more attractive to more users and developers.
This could in principle allow them to do practical things that are too big today, or complicated programs, so they become expensive, ”Back said. This would allow them to be used more widely.
The exact new applications that Taproot will enable may take some time to determine.
It will honestly take years for developers to figure out how they are going to implement these new types of transactions, ”said Nic Carter, general partner of Castle Island Ventures. But it is certainly a margin of creativity. I really see it as a driver in as much as it proves that Bitcoin can still innovate and level up. “
The Taproot update was approved last weekend by the majority of miners, whose computers verify transactions and receive Bitcoin. It will take place in November.
We obviously support anything that will increase demand for new uses for Bitcoin and the Bitcoin network, ”said Fred Thiel, CEO of Marathon Digital Holdings, a pro-upgrade Bitcoin miner. This ensures the long-term viability of the Bitcoin network and mining. “
Taproot will be a soft fork, which means the upgrade will be compatible with older versions of the software.
A key feature is the so-called Aggregate Public Key MultiSignature, which effectively masks some of the complexities of a transaction posted to the Bitcoin network. Not only does this guarantee greater confidentiality of transactions, but it also allows, by reducing the amount of data to be recorded on the blockchain, cheaper transactions.
Major blockchain investigative services like Chainalysis and Elliptic have said they should still be able to figure out the usage anyway.
Taproot has little impact on the traceability of Bitcoin, ”said Tom Robinson, co-founder of Elliptic. However, there is a push to introduce other privacy features into Bitcoin which would make it much more difficult to track criminal funds. I think Bitcoin has been able to thrive in recent years in part because its traceability has allayed regulators’ concerns about its illicit use. “
The lower fees could also boost efforts like RSK and Stacks, which make it easier for developers to build decentralized applications, or dapps, for Bitcoin – such as yield services that allow people with digital currency to earn rewards. interest on coins.
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